AUD/USD holds to gains above 0.6700 ahead of RBA minutes

The AUD/USD climbs during the North American session, above its opening price by 0.12%, as sentiment fluctuates between risk-off/on, courtesy of increasing recession fears in the US spurred by an aggressive Federal Reserve. At the time of writing, the AUD/USD is trading at 0.6713.

Of late, US equities are fluctuating as investors prepare for the Fed’s decision on Wednesday. At the same meeting, policymakers are expected to update their forecasts regarding interest rates, unemployment, and US GDP growth. AUD/USD traders should be aware that it will include projections for 2025.

AUD/USD gains some ground ahead of the RBA minutes and Fed’s decision

The Federal Reserve Open Market Committee (FOMC) is expected to raise rates by 75 bps, to the 3-3.25% threshold, amidst an environment of headline inflation above 8%, below the YTD peak around 9%, while core CPI it’s getting higher, at around 7%.

Reflection of the above-mentioned is higher US Treasury bond yields, with the 10-year benchmark note rate gaining almost three bps at 3.473%, underpinning the greenback, which, as portrayed by the US Dollar Index, gains 0.10% at 109.754.

Aside from this, in the Asian session, the Reserve Bank of Australia (RBA) head of domestic markets Jonathan Kearns said that “higher interest rates reduce borrowing capacity and increase loan repayments,” meaning that increasing borrowing costs would trigger a decline in the housing market.

In the meantime, RBA Governor Philip Lowe last week opened the door for a less aggressive monetary policy at “some point,” putting 25 bps rate hikes in play for the October monetary policy meeting.

Analysts at TD Securities expect the RBA to hike 50 bps in October while “retaining 25bps hikes for the Nov, Dec and Feb ’23 meetings, taking our terminal cash forecast from 3.35% to 3.60%.”

The Aussie calendar will feature the RBA minutes on Tuesday, and the RBA’s Governor Michele Bullock will cross newswires on Wednesday. On the US front, the FOMC will unveil its monetary decision on Wednesday, alongside the press conference of Chair Jerome Powell, 30 minutes after the decision.

AUD/USD Key Technical Levels